Wednesday, May 6, 2015

While it certainly hasn't
been getting headlines like the 1988 free trade deal (FTA) between Canada and the United
States and the 1994 North American Free Trade Agreement (NAFTA), the Obama
Administration is doing its best to push the Trans-Pacific Partnership, a "...21st century trade agreement that will boost U.S.
economic growth, support American jobs, and grow Made-in-America exports to
some of the most dynamic and fastest growing countries in the world."
Partners to the TPP include Australia, Brunei Darussalam,
Canada, Chile, Japan Malaysia, New Zealand, Singapore, Vietnam and of course,
the United States.

In its most
recent attempt to spoon-feed us the benefits of the TPP, the U.S.
Department of the Treasury released a letter from all ten former U.S.
Secretaries of the Treasury that called for Congress to swiftly pass the
"Bipartisan Congressional Trade Priorities and Accountability Act of
2015" aka the Trade Promotion Authority (TPA) that was introduced to
Congress in mid-April 2015. The TPA, or what was once known as Fast
Tracking, a power that has only been used 16 times in America's history, will
provide trade negotiators with the unfettered ability to complete trade
initiatives that will "advance U.S. economic and geopolitical
interests.". The implementation of TPA will prevent meaningful
modifications of any trade deals by Congress and eliminates the possibility
of public scrutiny of any deals reached.

We write to
express support for Congressional renewal of Trade Promotion Authority (TPA).
Our support for open trade agreements is based on a simple premise: expanding
the size of the market where American goods and services can compete on a level
playing field is good for American workers and their families. Expanded
international trade means more American jobs and higher American incomes. It
means greater access for American businesses to markets and consumers around
the world, and it means lower prices for American families here at home.
International trade, and the trade agreements that enable it, is happening and
will continue to happen whether or not the United States participates. Our
choice is to give American businesses and innovators the opportunity to share
in the advantages those agreements provide or to remain outside the agreements
and allow our competitors to benefit alone.

The
enactment of TPA will directly improve our ability to complete trade
initiatives that advance U.S. economic and geopolitical interests. The most
immediate agreements are the Trans Pacific Partnership (TPP) and the
Transatlantic Trade and Investment Partnership (TTIP). The TPP will support the
growth of U.S. exports to a fast-growing region that includes countries that
represent nearly 40 percent of the global economy, and will bolster the
strategic role of the United States as an economic leader within the
Asia-Pacific region. The TTIP offers an opportunity to further cement our
strong trading relationship with the European Union.

We agree
that no country should use an undervalued currency to gain an unfair
competitive advantage and grow its exports. The United States should continue
to use multilateral and international mechanisms and diplomacy to prevent
unfair currency manipulation. While the desirability of including currency
manipulation in trade agreements can be debated, as a practical matter, it is
impossible to get agreement on provisions that subject currency manipulation to
trade sanctions in a manner that both the United States and other countries
would find acceptable. Because we believe an agreement is strongly in the
economic and security interests of the United States, we respectfully urge
Congress to approve Trade Promotion Authority.

Sincerely,

Timothy F.
Geithner

Henry M.
Paulson, Jr.

John W.
Snow

Paul H.
O'Neill

Lawrence H.
Summers

Robert E.
Rubin

Nicholas F.
Brady

James A.
Baker, III

W. Michael
Blumenthal

George P.
Shultz"

By having
these illustrious individuals as promoters of freer trade for America, all
opponents to opening up trade channels are marginalized.

Let's look
at a couple of examples of the high cost of previous free trade deals to
American workers.

1.) North
American Free Trade Agreement or NAFTA: Back in 1993, former President
Bill Clinton claimed that NAFTA would create an export boom to Mexico. As well, 200,000 American jobs would be created in the
first year and a million jobs would be created in the first five years of
the deal. According to research by the Economic Policy Institute (EPI),
NAFTA's legacy was job losses for American workers as shown on this graphic which shows the growing trade
deficit between the United States and Mexico:

By 2010,
EPI estimates that trade deficits with Mexico had eliminated 682,000 U.S. jobs,
mainly good-paying jobs in the manufacturing sector. According to Public Citizen, twenty years after it was signed, NAFTA has
contributed to downward pressure on U.S. wages and wage growth and that
reductions in consumer goods prices that have materialized as a result of the
deal have not been sufficient to offset the losses to middle-class wages under
NAFTA. On the Mexican side of the deal, real wages in Mexico have fallen
below pre-NAFTA levels as price increases for basic goods have outstripped wage
increases. Over half of Mexico's population still falls below the poverty
line.

Here is a
look at a two of the specific corporate promises that were made before NAFTA
was signed and what actually happened:

So much for those promises!

2.) United
States - Korea Free Trade Deal or KORUS: This deal, which was brought into force on
March 15, 2012, promised "...countless new
opportunities for U.S. exporters to sell more Made-in-America goods, services,
and agricultural products to Korean customers – and to support more good jobs
here at home.". The U.S. Trade Representative estimated that the
reduction in Korean tariffs would add $10 billion to $12 billion to the
U.S. GDP annually and around $10 billion in exports to Korea.
The Obama Administration estimated that the agreement would support
70,000 American jobs from exports alone. Things do not appear to have
worked out quite as optimistically. In the year after the agreement took
effect, U.S. domestic exports to Korea fell $3.5 billion compared to the same
period a year earlier and imports increased by $2.3 billion, pushing the
bilateral U.S. trade deficit with Korea up by $5.8 billion or 39.8 percent.

Here is a graphic showing what has happened to U.S. exports to Korea,
its imports from Korea and America's growing trade deficit with Korea
since 2000:

As well,
according to the Economic Policy Institute, instead of the 70,000 jobs promised
with the implementation of KORUS, the free trade deal has cost the American
economy 60,000 lost jobs in its first two years.

Obviously,
we should be concerned about the implementation of further free trade
agreements that result in the destruction of jobs. While the deals are
being sold to us on the basis of export growth, quite clearly, the trends in
trade deficit numbers show that freer trade does not always mean higher levels
of exports from America to outside markets as shown on this chart:

In fact,the
data would seem to show us that the exact opposite is occurring and that we are
importing far more from our free trade partners than they are importing from
us. Data shows that the United States now has an annual goods trade
deficit of $177 billion with its 20 free-trade partners
and, that over the past decade, U.S. export growth to countries that are not
free-trade partners exceeded the growth of exports to America's free-trade
partners by 24 percent.

This is
why we have to be very careful when we hear the Obama Administration and the
U.S. Chamber of Commerce touting the benefits of the Trans-Pacific Partnership. The impact of the TPP will still be felt long after President Obama has left office. His quest to get fast-track trade authority to sign and
enter into the TPP before Congress votes to approve its terms is just asking
for even more pain for America's beleaguered middle class workers.
Remember, it is thanks to Fast Tracking that the United States
ended up with NAFTA. While most of us are not against freer trade, we are
against freer trade that is unfair, particularly to our domestic workforce.

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About Me

I have been an avid follower of the world's political and economic scene since the great gold rush of 1979 - 1980 when it seemed that the world's economic system was on the verge of collapse. I am most concerned about the mounting level of government debt and the lack of political will to solve the problem. Actions need to be taken sooner rather than later when demographic issues will make solutions far more difficult. As a geoscientist, I am also concerned about the world's energy future; as we reach peak cheap oil, we need to find viable long-term solutions to what will ultimately become a supply-demand imbalance.